The following article was originally posted Sept. 8 on LinkedIn by Nick Peluso, President, Manheim Digital Marketplace + RMS Automotive. Peluso will host a workshop on Wednesday, Nov. 15 during the NRC/NAAA Convention, focused on the market forces that are prompting consignors and their service providers to reexamine their in-lane, online and retail remarketing strategies, including how disruption is affecting their day-to-day decision making.

General Motors announced last week the launch of a mixed reality showroom to provide an augmented showroom experience for consumers, allowing them to virtually experience a car showroom at any time and from anywhere in the world. Potential buyers can now be shown how the car’s inbuilt features and technologies work, and walk around to explore the interior of the virtual car, without the typical constraints of a showroom. For a generation that has vague memories of life before the internet, few of us imagined that digitization would significantly transform as many industries to the extent that it has from just a couple of decades earlier.

About 20 years ago, when I had the responsibility to drive revenue growth and market share with ADT Automotive, mobile phones were just starting to make their way into the mainstream and companies such as AOL were only emerging. Marketing was less sophisticated than today; we relied more on advertising at the auctions with flyers and phone-call outreach to dealers. The internet was making progress but was still very slow with dial-up modems. I rarely surfed the web for more than a few minutes; it took 30 seconds or longer to load each page, and, we were paying for the internet by the hour. We were learning new vocabulary like “World Wide Web,” “Email” and “Information Super Highway.”

People were talking about how one day, used wholesale vehicles would be remarketed on the internet and slowly put physical auctions out of business. The auction business was alive and thriving, and this future of online shopping and instant access to much of the world’s knowledge was not a given. Clifford Stoll wrote an article forNewsweek in the Feb. 27, 1995 issue, expressing skepticism about this trendy and oversold community:

“We’re promised instant catalog shopping — just point and click for great deals. We’ll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obsolete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet — which there isn’t — the network is missing an essential ingredient of capitalism: salespeople.”

By 1996, 20 million American adults had access to the Internet, and the dot-com boom had already begun on Wall Street—Netscape went public in 1995. In an article ranking the best sites of 1996, Time magazine recommended Amazon.com as a go to place to search for new and used books “by the author, subject or title” and “read reviews written by other Amazon readers and even write your own.”

1997was the start of a period of extreme growth in the usage and adaptation of the internet by both businesses and consumers.

The Google.com domain was registered

The online auction website, AuctionWeb, received $6.7m from venture capital firm Benchmark Capital and changed the name of its service from AuctionWeb to eBay. Existing users were migrated to an entirely new platform that featured a more graphical website and home page.

Amazon introduced 1-Click Shopping, eliminating the need for shoppers to re-enter payment information every time they made a purchase, one of the earliest signs that Amazon would be a disrupter to be reckoned with. The 1 click shopping was so unique that Amazon was awarded a U.S. patent for the technology. That same year Amazon announced an IPO and began trading on the NASDAQ exchange. In 20 years, the company that started out selling books online has quickly and efficiently grown into one of the biggest online forces in the world. Originally named Cadabra, Amazon now sells a stunningly broad range of merchandise and has morphed into a retail titan, worth twice as much as Walmart.

The world’s largest operator of wholesale automobile auctions, Manheim, launched Manheim Online, allowing dealers to search, view, research and purchase vehicles 24 hours a day, complimenting Manheim Auctions’ traditional auction business. The service puts wholesale vehicle professionals in the driver’s seat, to virtually “kick the tires” of automobiles from major manufacturers online while enabling them to view and inspect digitized images of vehicles for sale from the online “CyberLot”. Manheim Online made it possible for dealers to search for a car by make, model and year with details about the vehicle’s equipment, color, transmission type, mileage, and condition.

Role of auctions in used-car salesA used-car auction is more than a marketplace; it is a culture in itself. Car dealers come to auctions to not only buy and sell, but they also come to meet and socialize. Manheim has built services around its auctions that make it easier for dealers to do business. Do the cars that are being sold need body work or engine repairs? Does a dealer need to store vehicles for the next auction? Manheim will take care of it. This approach built relationships with thousands of dealers that trust Manheim to stand behind the cars bought and sold.

In the offline world, car dealers have used auctions for years, standing in the lanes, watching the cars roll down the lane. A typical auction facility has anywhere between 10 and 15 physical lanes with a podium adjacent to each lane with an auctioneer. The cars continuously move down the lane and every minute or so, the hammer falls and the vehicle at this point is either sold or is not sold, exiting out the other end with another car following closely behind.

Auctions are important in the sale of used cars because not only do they provide dealers with a ready source of automobiles, they protect the buyer(s) and seller(s) in the vehicle transactions by handling the transfer of funds, title and other administrative tasks. Dealers can rest assured that If they discover a problem with a car before leaving the auction site, the sale can be nullified.

The launch of Manheim OnlineSatellite television brought the first attempt at auctions where the buyer was not physically at the auction, participating through an electronic medium remotely. Satellite television reduced the travel expenses and time by allowing the dealer to purchase used cars without leaving the dealership. In 1995 Manheim purchased the rights to a system from the UK called Auction Vision to sell cars electronically to U.S. based Chrysler dealers. Auction Vision used a satellite link to a television studio that resembled those used by a telethon to raise money for charities. Instead of accepting calls from viewers wishing to pledge money to a charity, the operators took calls from dealers wishing to bid on the auto currently pictured on the TV screen. Once the call was made, the operator would continue to act as a surrogate buyer as long as the dealer continued to bid on that car or a series of cars. Like in physical auctions, the vehicles were displayed on the screen at a rapid rate to generate the same level of excitement as an auction lot.

Auction Vision used a television studio owned by Cox Enterprises to broadcast the auctions. The auctioned cars were located at Manheim Auction facilities being processed at they would for the normal auction process. Digital photographs and detailed descriptions of the vehicles were used in the Auction Vision system. Chrysler dealers were notified of upcoming sales by closed circuit television broadcast(s) and presale videotapes. Since the cars were already at a physical auction, Manheim just moved the live auction to television and the telephone operators relayed the dealer bids at the auction while the photographs replaced the physical car.

Auction Vision was successful however it required a lot of work. The studio had to be set up ahead of time with lights, cameras, sound system, production crew, telephone operators, satellite link and other details before the auction could take place. Everyone had to be in place at the same time and auctions had to be run three times a day to handle the different US time zones.

In early 1996, Manheim realized the internet would be a better approach and built the prototype, opting for a purchase system that would allow dealers to buy program cars at a set wholesale price the consignor determined. Any dealer who was certified to participate in a Manheim auction and connected to the internet could purchase a program car by accessing the Manheim website.

After perfecting the service, Manheim Online was launched in the fall of 1997 as the only electronic commerce site for wholesale automobile professionals, reaching $60 million in sales by year-end. Manheim Online continued to grow quickly in 1998, reaching $40 million in sales in the first quarter, placing the company on track to double its 1997 revenues in the first half of 1998. On April 10, 1998, Manheim Online reached the million-dollar milepost with $100,701,689 in total cumulative sales since its launch. Today, roughly 32 percent of Manheim’s sales are online.

Overcoming virtual auction challengesIn the physical auctions, buyers can physically inspect a car, kicking the tires, opening the door and smelling the interior. Manheim Online overcame the challenge by leveraging the Manheim auction physical assets. When a vehicle arrives at the physical auction site, a complete description of the vehicle is created that includes information such as model, color, mileage, vehicle options, year, and engine capacity. Digital images are taken as well, showing all aspects of the vehicle: exterior, interior, and any damage. It was a big leap of faith for dealers to view a car on a computer screen, and not to be able to physically inspect the car yet continue to make that purchase and again, putting down significant amounts of money, and in some cases, behind those units.

Other online services provided by ManheimPreviously delivered once a month on disk to subscribing dealers, The Manheim Market Report (MMR)is a complete analysis of the past month’s sales at all Manheim auction sites. With Manheim Online, MMR was now available with the most recent sales results.

In addition to the MMR, Manheim introduced a new service from its non-subscription site called AutoConnect.AutoConnect allowed for a person to input a geographic location and details on the type of used car desired. AutoConnect then located the nearest dealer that met the search criteria.

These services enhanced Manheim’s presence as an information business.

End-to-end solutions from wholesale to retailThe pace of technology adoption is speeding up and digitization is blurring the lines between the physical and digital experience. The digital marketplaces coupled with physical auctions, allow for more opportunities for buyers and sellers to connect and transact, buying and selling vehicles how they want and when they want, creating a seamless omni-channel experience.

Buying and selling with Manheim can happen anywhere, anytime. We offer a mix of live auction and online sales for transacting at physical and mobile auction locations as well as dealer lots. With end-to-end integrated solutions, the entire process of inventory management, buying, selling, floor planning, logistics and reconditioning is all turn-key.